09th January 2023

Recession is small businesses’ main concern, with a quarter predicting their company will shrink in 2023 

 

• Downturn fears grip SMEs, with 43% identifying recession as their top concern going into 2023.

• Over three quarters are concerned about the potential reduction in government support on their energy bills.

• One quarter of business owners expect their business to shrink in the next 12 months – up a third from this time last year. 

• More than two in five SME owners think they will personally be worse off by the end of 2023 - up from a third a year ago.

 

(January 9, London) Concerns around recession, inflation, and high operating costs are causing distress to UK small businesses as they enter this year, according to new SME Outlook 2023 research from iwoca – one of Europe’s largest small business lenders.

 

Recession concerns widespread among SMEs, research finds

As the UK economy shrinks, and high inflation coupled with increased interest rates hit consumer spending and businesses, over two in five (43%) small business owners identify a recession as their top concern in 2023. 

In the context of soaring prices of energy, raw materials, and the scarcity of labour, inflation remains the main challenge for over a third (38%) of small businesses. The effects of inflation – decreased consumer spending (29%) and increased business running costs (38%) – are also cited as key worries for UK small business owners. 

As the future of government support with energy bills hangs in the balance, over three quarters (76%) of small business owners are concerned that energy bill support for businesses may be scaled back in the first half of this year. One in three (32%) SMEs expressed significant worry around the potential decrease in government energy support.

Small businesses brace for a difficult year 

The data also reveals that a quarter of small businesses (25%) expect their turnover to shrink in the next twelve months, up a third on last year’s figures. This comes as more than two in five (43%) SME owners think they will personally be worse off by the end of 2023, up from a third a year ago. Echoing this outlook, just a quarter (26%) of small businesses expect revenue to grow over the next year, down from 28% at the start of 2022. 

 

On hiring in 2023

As small business owners brace for little to no growth in 2023, they foresee limited hiring in the next 12 months. Eight in ten (79%) small business owners expect to employ the same number of workers this year as they did in 2022, and only 7% suggest they would employ more staff over the year, a 2pp drop on last year. 

 

Seema Desai, iwoca’s Chief Operating Officer, said: “This recession presents extreme uncertainty for small businesses. As big banks retrench, our job as a specialist SME lender becomes even more important. Business owners are going to need finance to help with cash flow, pay staff wages, increase stock and of course cover things like higher energy bills and cost of materials.”

 

ENDS

 

• Photo of Seema Desai, iwoca COO found here.

 

Notes to Editors

 

About the survey

iwoca conducted an online survey with Panelbase of over 500 SME owners across the country over two weeks in December 2022. Over two weeks in December 2021, iwoca conducted an online survey with Panelbase of over 500 small business owners across the country as well.

About iwoca

iwoca is unlocking economic growth by expanding the financial possibilities available to small business owners. Since launching in 2012, we’ve made more than £3.5 billion of finance available to 70,000 businesses, and raised over £500 million in equity and debt finance. We provide loans, payments and invoice solutions for small businesses in any industry. For more information go to www.iwoca.co.uk, like our Facebook page and follow us on Twitter @iwoca and Instagram @iwoca.

 

About the data